Warren Buffett, CEO of Berkshire Hathaway, has an impressive track record of outperforming the market. A $1,000 investment in Berkshire Hathaway on the day Buffett purchased the company in 1965 would now be worth over $26 million, making him one of the best investors in history.
Recently, Buffett has recommended five stocks in the Berkshire portfolio for long-term investment. These stocks include Amazon, Apple, Taiwan Semiconductor Manufacturing (TSMC), Bank of America, and American Express.
Nvidia
Nvidia’s key customers, including Meta Platforms, Alphabet, and Microsoft, continue to make significant investments in data centers and artificial intelligence (AI) capabilities. This is particularly advantageous for Nvidia as they are the leading provider of GPU chips used for accelerated computing, including AI applications.
According to Markets and Markets, the data center accelerator market is projected to grow at a rate of 25% per year, reaching $64 billion by 2027. In the upcoming quarter, Nvidia’s financial results will incorporate early shipments of their new H100 data center chip, which is expected to generate strong demand as customers upgrade their hardware.
While Nvidia is currently facing a period of lower performance, the long-term growth prospects for advanced chips are favorable for investors. The company’s management has provided guidance for the fiscal fourth quarter, indicating modest sequential growth in gaming, data center, and automotive segments. This guidance could potentially mark the beginning of a turnaround.
Amazon
Amazon is a major and influential company known for its e-commerce, cloud infrastructure services, and digital advertising. The company is the 3rd largest digital ad company by revenue in the US, behind Alphabet and Meta Platforms.
Amazon has delivered strong sales and profit growth over the last decade. However, the company has faced some challenges with valuation multiple compression, and operating headwinds due to macroeconomic factors. Nevertheless, there is an opportunity to buy Amazon stock at a price that could lead to stellar returns over the long term. The company’s core business pillars still look quite strong, and there’s a good chance that its stock will bounce back and reach new highs.
Apple
Apple’s iPhone defined the smartphone product category and set the standard for design and features that competitors attempted to emulate. Apple’s big profit margins in the mobile space, are cultivated by loyal customers willing to pay a premium for a premium product. Apple captured 80% of total global profits on smartphone sales.
The company is one of the most profitable in the world, thanks to its pricing power and solid foundation in hardware business and profitable software and services ecosystem. Apple will likely be able to continue branching into new hardware and software categories and drive profitable growth for years to come. Apple is Berkshire’s largest stock holding, accounting for 42% of the company’s equity portfolio.
Taiwan Semiconductor Manufacturing (TSMC)
The global semiconductor market is expected to grow from $573.44 billion in 2022 to $1.38 trillion in 2029, with a CAGR of 12.2%. Taiwan Semiconductor Manufacturing (TSMC) is the world’s largest fabricator of semiconductors, accounting for 55% of the contract chip market and 90% of the market for high-performance chips.
TSMC is a major supplier to companies such as Nvidia, Advanced Micro Devices, and Apple, and even Intel relies on TSMC for manufacturing some of its designs. Berkshire Hathaway, led by Warren Buffett, bought 60 million shares of TSMC in Q3, worth $4.1 billion at the time of disclosure, making it the 10th-largest overall stock holding for the company.
Bank of America
Warren Buffett played a key role in shaping the Troubled Asset Relief Program that helped save the banking system, and then guided Berkshire to make a $5 billion investment in Bank of America during the 2011 debt-ceiling crisis.
Bank of America has become a smarter, more effectively run company since Berkshire initiated its position and its fourth-quarter results once again arrived with better-than-expected sales and earnings. Bank of America is well positioned for the long term in a high-interest-rate environment and has appeal as a dividend stock with a payout yield of roughly 2.5% and has increased its payout by roughly 83% over the last five years.
American Express
American Express targets a premium-oriented customer base and has built strong brand strength through membership rewards and promotions. As pandemic-related challenges have eased and travel restrictions have lifted, AmEx has been registering strong sales growth. The company’s revenue net of interest expenses rose 24% year over year in the third quarter to reach approximately $13.56 billion, making it a good stock for the current inflationary environment. American Express has a dual engine for increasing earnings per share through organic growth and stock buybacks, and shares look attractively valued, trading at less than 15 times expected forward earnings. Additionally, the stock also pays a dividend-yielding roughly 1.3%.
Overall, American Express’s strong brand, recent sales growth, and attractive valuation make it a compelling investment opportunity.
Berkshire Hathaway, led by CEO Warren Buffett, has a track record of outperforming the market and has made several successful long-term investments. Overall, the five stocks in the Berkshire portfolio are excellent recommendations for investment since these companies are well-positioned for the long term in the current inflationary environment.
